NLA Written Evidence to the Work & Pensions Select Committee
Universal Credit Inquiry
The National Landlords Association (NLA) is happy to provide this written evidence for the consideration of the committee in its inquiry into Universal Credit.
About the NLA
- The NLA is the UK’s leading organisation for private-residential landlords. It works with over 76,000 landlords, of which more than 36,500 are members, ranging from full-time landlords with large property portfolios to those with just a single letting.
- NLA membership helps landlords make a success of their lettings business by providing a wide range of information, advice and services. The NLA campaigns for the legitimate interests of landlords by seeking to influence decision-makers at all levels of government and by making landlords’ collective voice heard in the media.
- It seeks to raise standards in the private-rented sector while aiming to ensure that landlords are aware of their statutory rights and responsibilities.
- The NLA undertakes quarterly surveying of our members in conjunction with independent market researchers BDRC Continental Ltd. According to the latest research (Q4 2016) the number of landlords letting to tenants in receipt of Local Housing Allowance (LHA)/Universal Credit (UC) housing cost element has fallen to 18 per cent. This continues a strong downwards trend which has seen the percentage fall drastically over the past 6 years from 48 per cent (Q4 2010).
- This is a national average, and the figures varies on a regional basis with 30 per cent of landlords letting to such tenants in the North East, compared with just 8 per cent in Central London. Those with the largest portfolios are much more likely to have a degree of exposure to this space, with almost half (48%) of 20+ property landlords letting to this tenant type.
What impact is Universal Credit having on rent arrears, what effect is this having on landlords and claimants, and how could the situation be improved?
- With regards to rent arrears, tenants in receipt of LHA/UC housing cost element remain the most likely to be in rent arrears compared to other tenant types. We are not able to provide a comparison of LHA tenants and those claiming the UC housing cost element with regards to their rent arrears. However, we see from our quarterly research that the overall figure landlords experiencing rental arrears from these tenants remains roughly unchanged over the previous 5 years (c.70% +/-4%). This could indicate that the situation is certainly not being improved with the continued rollout of Universal Credit, which now has 167,101 households claiming the housing costs element as of December 2016.
- The prevalence of rent arrears in this sector has long been a cause of concern for the NLA. As explained above, we see the continued shrinking of the number of landlords willing to let their property to claimants as a direct result. With landlord finances about to be squeezed further with the phased introduction of landlord finance costs tax relief restrictions beginning in April, this already small number could very well be reduced further.
- There are also a number of factors that play in to this that do not involve the specific delivery method of the benefit, such as the benefit cap and the ongoing freeze in LHA rates. These create a particular problem in areas such as London and the South-East and are likely to result in many more claimants being unable to locate suitable housing in these regions. This is either going to result in a steady increase in arrears or force tenants to re-locate; potentially to different regions of the country.
- Specific to UC, it is certainly unhelpful that the up to 6-week period for the first claim to be received can cause tenants to go into arrears from the very outset, beyond the structural arrears implicit in the existing system. For example, if the claim is made on 2nd January, the first payment may not be received until 13th February. If the tenant moved into the property on 2nd January, by the time of the first payment (13 February), the tenant will already be more than two contractual months in arrears. Going forward, changes need to be implemented in order to help improve landlords’ confidence in letting their properties to UC claimants:
Alternative Payment Arrangements (APAs)
- With the continued roll-out of UC across the country we are seeing some housing benefit tenants who are in rent arrears, or have direct-payments to landlords already in place not having a Managed Payments to Landlord (MPtL) implemented automatically. Such a process should be put in place as it is causing unnecessary disruption in rental payments and putting some tenants further into rent arrears. Likewise, we have been seeing APAs dropped from the system when a claim is restarted after a period in work, such as when seasonal work finishes.
- The process and restrictions for the landlord to apply for an APA should be improved. The current 2 month rent arrear requirement is too stringent and should be removed. If a landlord can apply for an APA from the beginning, they may be more likely to offer a property to a UC claiming prospective tenant, or keep on a tenant who is moving onto UC after a job loss or change in circumstances.
- The application process itself needs to be improved as currently the main way of application is by post as the alternative is by email from a secure email address that the vast majority landlords do not possess. Once an application is sent, the landlord is generally then unable to check on the progress of the application unless the tenant is with them to give express permission each time they call for an update.
- Many work coaches have also been unaware that they are able to apply for an APA for their claimant from the very first meeting. If they can see that the claimant is already in rent arrears, or is at risk of going into arrears, they should be making the application at that stage rather than having to wait until the arrears are already building up.
- We have been made aware that upon a claimant’s request for a discretionary housing payment (DHP) some local authorities have insisted that the APA for the housing cost element to the landlord be terminated before the application is processed. DWP has since updated its guidance stating: “DWP does not see any legal reason why DHPs cannot be paid to Universal Credit claimants who have an MPTL in place.” The NLA believes that DWP should ensure that local authorities are unable to request that APAs are discontinued for a DHP to be considered.
- Many landlords who specialise in the Local Housing Allowance (LHA) market at the moment have built up good relations with key Housing Benefit staff in local authorities. Under Universal Credit, decisions will be taken through on-line applications and central call-centres. Therefore, these essential local links will be lost and as a result local authority based Tenancy Relations Officers are of vital importance.
- Such staff in local authorities can act as impartial arbiters should problems with a tenancy arise in order to avoid tenancy breakdown and the need for landlords to seek possession. Unfortunately, many local authorities have withdrawn these services as a result of funding reductions and therefore DWP should consider funding at least one officer in each local authority to undertake this function; especially to act as a liaison point between landlord, tenant and DWP.
- To the credit of DWP, they have been regularly engaging with stakeholders and have promised to look into such issues.
Would certain groups benefit from greater payment process flexibility and, if so, what might the Government do to facilitate it?
- We would urge the Government to introduce similar blanket flexibility to the payment process that the Scottish Government will be introducing in Scotland from April.
- The Scottish Government recently consulted on regulations that will grant Universal Credit claimants in Scotland the ability to choose to be paid every two weeks, and to choose to have the housing cost element paid direct to the landlord at any time.
- The NLA believes that such flexibilities, if introduced in England & Wales, could help alleviate the continuing reduction in landlords offering tenancies to those in receipt of benefits. With the ability to instigate an APA from the outset, the risk of tenants falling into rent arrears from which they cannot escape will also be reduced.
- While we understand the Government’s argument that claimants need to be responsible for paying rent and other expenses just as they would be when in employment, we believe that enforcing this argument is restricting claimants’ access to many properties as landlords leave that market, and causing landlords and tenants financial damage through unnecessary and preventable rent arrears.
- We hope the committee finds these observations useful. The NLA would be happy to provide further evidence, in writing or in front of the committee if requested.